Page 609 - WhyAsInY

“resolvinG tHe Crisis; restorinG tHe ConfiDenCe”
process. I believed that the RTC should contribute massive amounts of land in a particular geographical region to a limited partnership in which the ultimately successful qualified bidder would be the general (operating) partner, the RTC would be the limited (somewhat passive) partner, and the general partner would be free to obtain new financing for each of its development projects. The original umbrella partnership would have the ability to split off land that was ready for development into separate subsidiary entities, partnerships that mirrored the rela- tionship of the general partner and the RTC in the Land Fund limited partnership but whose cash flow would be distributed to the Fund. Instead of acting as a lender, the RTC, having contributed the land to the transaction, would never be “paid off ” and gotten rid of by the suc- cessful bidder.
Instead, the RTC would have a continuing equity interest in the success of each venture and be entitled to receive not only the first moneys earned (up to a target amount that the successful bidder would have in effect agreed to in the bidding process) but also a 50-percent interest in all of the ultimate hoped-for ongoing earnings after that tar- get was reached. I believed that the retention of an “upside” by the government would make the concept more politically palatable. Ulti- mately, the winning bidders paid, in cash, 25 percent of the value that they placed on their Fund, and, after the RTC received an amount equal to the remaining 75 percent of that value, the remaining earnings would be shared evenly.
The idea of the government acting as a partner needed to be effec- tuated in such a way that the private party who became the general partner would have sufficient latitude and flexibility to get his develop- ment job done, but that the RTC would retain sufficient controls to prevent the government’s embarrassment (as you know, a key concept in Washington). To test the idea, I spoke at conferences in Dallas and Den- ver, and I invited input from prospective developer-bidders. The idea appeared to be attractive to the developers, and the prospective partner- ship agreement that I developed needed only a small amount of tinkering. The more important test, however (other than the bidding
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